Insurers Face Cap On All Riders From Today

All life insurance companies will stop selling insurance products where the premium from riders exceeds 30 per cent of the premium from the base policy.

This comes into effect from August 1, following the Insurance Regulatory and Development Authority (IRDA) directing insurance companies to cap the rider premium at 30 per cent as per the letter in the Protection of Policyholders' Interests) Regulations, 2002.

The cap will be applicable on all new covers bought from August 1. Existing insurance policies will not be affected and will continue to enjoy a wider coverage even if the premium from riders exceed 30 per cent.

HDFC Standard Life has already lost out to the competition, having been the first off the block to make the necessary change in the sale of products.

"Sales have gone down marginally. The impact is especially apparent in the younger age group," said HDFC Standard Life managing director Deepak Satwalekar.

Om Kotak Mahindra Life Insurance Company limited the extent of coverage under the riders' mode from July 1, and Max New York Life Insurance Company also followed suit.

Birla SunLife Insurance Company associate director business development Anjana Grewal said that all necessary changes in the software and the systems have been incorporated to meet the prescribed 30 per cent cap on the sale of riders. ICICI Prudential Life Insurance Company and Birla SunLife will restrict the rider coverage to meet the 30 per cent cap from August 1.

The Life Insurance Corporation of India (LIC) is at an advantage since its policies already offer a bundled product approach. Some of the new players are also planning to offer bundled products. "We will be forced to come out with new, bundled products that reduce the flexibility for the policyholder," said Om Kotak CEO Shivaji Dam.

Satwalekar however, refuses to budge. "We are not planning to offer any consolidated product because we feel that the regulations are wrong in capping the rider premium at 30 per cent," he pointed out.

ICICI Prudential has introduced Easy Life, a combined product for ICICI group companies, bundling a term assurance cover with accidental death benefit.